HSBC to change pay structure to avoid EU bonus cap

HSBC is to change its pay and bonus structure to mitigate the new European Union bankers’ bonus cap, which came into effect from January 2014.


According to its Annual report and accounts 2013, it will make two main changes to its current remuneration policy:

  • The introduction of a fixed-pay allowance based on role and responsibility.
  • The opportunity for variable remuneration will be limited to a maximum of 200% of fixed pay.

Under the requirements of the bonus cap, variable pay awards are restricted to 100% of fixed pay, but can be increased to 200% with shareholder approval.

HSBC intends to increase its variable pay to 200% of fixed pay, which will be put to shareholder approval on 23 May 2014 at its annual general meeting.

The report also showed that the bank’s bonus pool increased from US$3.69 billion (£2.21 billion) in 2012 to US$3.92 billion (£2.35 billion) in 2013.

The report stated: “The requested increase in the cap would give us the ability to minimise the increase in fixed remuneration costs and so help to maintain greater flexibility on total pay.

“We believe that it is vital to maintain the link of variable pay to the achievement of the business objectives of the organisation, and it is also necessary to ensure our total compensation package for material risk takers remains competitive.

“As a result, a rebalancing from variable pay to fixed pay to the extent necessary to achieve this objective is warranted.”